Exploiting Asset-Liability Management Concepts in Private Wealth Management

Abstract

Asset and liability management (ALM) has traditionally been applied to banks, insurance companies and pension funds. In this chapter we will introduce a new application area of ALM: private wealth management. Over the past dec-ade, private wealth management has become a profitable business for banks and asset managers around the globe. According to the private banking and wealth management survey conducted by Euromoney (2008), global private banking assets rose to USD 7.6 trillion in 2008, from USD 3.3 trillion the year before. This increase is currently driving a growth in the wealth management market, creating greater opportunities for wealth advisors to leverage new tech-nology to acquire new clients and grow profits. As a result, competition among wealth advisory firms is increasing for new ways to improve existing client relationships and provide new tools to improve advisor effectiveness. While the private banking industry is, in general, relatively well equipped on the tax-planning side, with tools that can potentially allow private bankers to analyze the situation of high net worth individuals operating offshore or across mul-tiple tax jurisdictions, the software packages used on the financial simulation side typically suffer from significant limitations and cannot satisfy the needs of a sophisticated clientele.KeywordsReal EstateStock ReturnPension FundEfficient FrontierAsset AllocationThese keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.